Time-Varying Country Beta Approach in Modelling Country Risk of Turkey

Time-Varying Country Beta Approach in Modelling Country Risk of Turkey

Bu makale Dr. Ahmet Kerem ÖZDEMİR ve Dr. Mehmet Emin YILDIZ ile yazılmış olup, Journal of Business, Economics and Finance Dergisi’nin Aralık 2015 tarihli, 4. sayısında yayınlanmıştır. Makalenin tam metnine linkten ulaşabilirsiniz.


This paper analyses Turkey’s country risk using a time-varying country beta market model incorporating various macroeconomic variables over the period January 2004 to August 2015. To our knowledge, this is the first study exploring Turkey’s country risk using country beta approach. We confirmed that Turkey’s country beta is time-varying and demonstrates a huge amount of volatility especially between 2004 and 2007. We find that government and private sector external debt and market interest rates are the significant macroeconomic factors that have influenced Turkey’s country beta during the analysis period. These findings reveal an important structural macroeconomic change in Turkish economy that is concerned about the sustainability of government debt and public finances have shifted to private sector related issues. Specifically, while private sector external debt, which increased rapidly during this period, has a significant positive impact on Turkey’s country beta, substantially lowered levels of government external debt (as a percentage of GDP) acts as a risk-reducing macroeconomic factor.



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